The gains of unit based pricing

METRI performs benchmarks for internal or external service providers on infrastructure, telecom and application services.

A balanced benchmarking methodology that takes into account four essential dimensions:1. Volumes (higher volumes bring economies of scale and decreases

costs/price)

2. Complexity (a more complex environment services increases costs/price)

3. Quality (higher service levels services increases costs/price)

4. Service Delivery (more activities within a services increases costs/price)The client’s specific service structure is no longer required to be shaped towards a default structure. Results are transparent and easy to interpret.

Data collection and analysis are based on these dimensions. The underlying components consist of price/cost-drivers and context aspects. For a fair and realistic comparison, the differences within the dimensions are normalised and the corrected price difference set. Comparisons are available on both high level and operational detailed level.

Most important dimensions in a Benchmark

Benchmark results – Normalised

0

1

2

3

4

5

6

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Costs / price

Volumes

ComplexityQuality

ServiceDelivery

Client

Reference group

2

What is happening?3

Internet trends 2016 Mary Meeker @Kleiner Perkins Caufield & Byers

Is it a Phone …. Is it a Camera? Is it a car … Is it a Computer?

4

Preferences target audiences are changing5

Current immature practice is untenable6

We need a paradigm shift in software production7

Bad practices vs good practice

Bad

• Ratecards and hour prices are the de facto standard

• Low hourly prices = a good deal

• ‘Petrol 1€ today’ = fixed pricecontract

• ‘Petrol 20€ per minute’ = time and materials contract

• No grip whatsoever on output, quality and outcome

• Example: customer with cheaphour prices but 10 times more invoiced hours then peers

Good

• Base sourcing decisions on productivity unit and qualitybaseline

• Fixed price per unit software

• ‘Petrol 1€/liter’ = a contract based on performance

• We want this quantity for thisprice and quality

• Example: customer cansource applicationdevelopment 10 timescheaper

8

Business involved and commissioning

We need adequate project estimation (in time, on budget);

We need productivitymeasurement (the right price);

We need quality control (the right constitution).

9

We need a common language and context

Software metrics community Business stakeholders

10

Software metrics in an Agile Environment

MANAGEMENT SCORECARD

PLAN SPRINT PLAN SPRINT PLAN SPRINT

2 weeks

DEVELOPMENT TEAM

Bi-weekly scans allows newly identified system-level defects to be included continuously.

PROGRAM MANAGEMENT

Tracks sizing, Quality, and Complexity trends. Manages backlog and help prioritize.

CIO & BUSINESS MANAGEMENT

Visibility to release quality, team performance, and business value.

STRUCTURAL QUALITY

COMPLEXITY

FUNCTIONAL SIZE

TIME

FUNCTIONAL QUALITY

COST

FUNCTIONAL TESTING

TIME TRACKING TOOLS

DEFECTS DEFECTS DEFECTS

CAST DASHBOARD

Remaining Structural Defects

APPLICATION BACKLOG PLANNED VS. ACTUAL FEATURES

FINAL RELEASE

Planned Features

Structural Quality Gate

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Software metrics community

• Avoid uncertainty and doubt around function points;

• Bring the debate forward by evolving standards and best practices;

• METRI wants to share AFP findings and smart measurement;

• Added value of software metrics for the business should be focus point;

• For that you need the right units of measurement in application outsourcing.

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What has outsourcing brought us?

We can’t do without it in software development andmaintenance.

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